Anyone here hedge the Physical holding?

[BuggedOut]

Interesting thread.

I'm a little bit like Golightly. PMs for me IS the hedge against my paper assets, a falling A$ and the potential SHTF financial crisis scenario. Would be a bit strange for me to hedge the hedge, but I hadn't really considered that another way to look at my portfolio would be to shift my paper assets into PMs and then hedge the PMs with paper.

Seems a bit hard-core but it's food for thought.

 

[wrcmad]

..... comex is currently at 128.3 ounces of paper to every ounce of phyzz they hold, why people would buy into that baffles me.

I'll give you three reasons:

1. Comex is currently at 128.3:1 oz's on the LONG side. But lets back up a step. Firstly, a futures contract has no claim on phys, so to quote the ratio in such a context is very misleading and fictional. However, if we entertain the idea for the sake of argument, this (conveniently) still remains only one side of the fantasy. There are actually 2 sides to every trade - on the SHORT side, the ratio is -128.3:1. So, it is actually balanced - loathed as the permabulls like to admit.

2. No one I know here in Australia trades paper PM's on COMEX, so the deceiving fallacy is irrelevant anyway.

3. Because it is much less risky than holding a physical naked long position.... which has shown to be financially disastorous over the last few years.

Hope that helps.

 

[House]

Stop bursting bubbles!

 

[theFNG]

This sounds like a good idea. But if you buy phyz and a Put in paper for insurance for a price drop, wouldn't you have to pay money if spot goes up. So you now have to sell your phyz to pay the piper on the Put probably more than you make selling the phyz too.

 

[Silverpv]

The insurance is cents on the dollar for a paper put, you would just let it expire. This is the reason it is a hedge. You are limiting your upside and downside by buying protection either as physical or paper. When you buy physical and have a put, if it goes down you get paid by the paper. If silver goes up you make up the difference from the physical, hence the hedge.

This is not for the faint of heart and if you don't know what you're doing it can be very bad. However, if you know what you are doing or learn how to do it well. You can protect yourself from a deteriorating market and make money, up down and sideways by being a diligent investor.

There are different reasons for holding silver. Until SHTF or Financial collapse with the manipulation, leverage the market to your advantage. I recently joined the silver stacking community on July 7th. I used to be anti metal, but figured now is a decent time to start. Buy low, sell high. I'm part of the balanced portfolio camp where only a percentage of total holdings is in PM's and only recently at that. I used to be primarily paper markets, but I do think the tide will change soon. Until then, hopefully i can make some pocket money on both sides of physical and paper markets.

SHTF / Financial collapse / Natural Disaster is a whole other situation, I don't think those with 3000oz is going to move very fast or take very much, if they need to run (natural disaster or mob). However, it does have its place! If not a natural disaster and only governmental/fiat collapse, then having a heavy stack is good.

It's always nice to have insurance for your insurance. And in the U.S., lead is plan C if metals are plan B and need some protection.

 

[Stroctor]

Excellent thread. Naked shorts, buying puts, hedging physical with paper etc. It is all very confusing. It does seem smart to get phys this way. Keep the info coming....

 

[Jim4silver]

..... comex is currently at 128.3 ounces of paper to every ounce of phyzz they hold, why people would buy into that baffles me.

I'll give you three reasons:

1. Comex is currently at 128.3:1 oz's on the LONG side. But lets back up a step. Firstly, a futures contract has no claim on phys, so to quote the ratio in such a context is very misleading and fictional. However, if we entertain the idea for the sake of argument, this (conveniently) still remains only one side of the fantasy. There are actually 2 sides to every trade - on the SHORT side, the ratio is -128.3:1. So, it is actually balanced - loathed as the permabulls like to admit.

2. No one I know here in Australia trades paper PM's on COMEX, so the deceiving fallacy is irrelevant anyway.

3. Because it is much less risky than holding a physical naked long position.... which has shown to be financially disastorous over the last few years.

Hope that helps.

A person holding a Comex contract as a long, can DEMAND delivery if he wants. The short side MUST produce the metals if certain conditions are met by the long (giving proper notice at the right time, paying the proper amount, etc). If the short does not or cannot come up with the metal, it is a DEFAULT. Note, this has never happened on the Comex absent a declaration of force majeure. Some online PM pundits claim no deliveries are being made in physical, this is complete BS. If there ever was a real DEFAULT, you can bet the Ted Butlers of the world would be ecstatic and PM bulls would be reading about it on every PM site.

So in reality, if all the longs demanded delivery there would be a huge problem covering all those demands. Unfortunately, those longs never seem to ask for delivery in the numbers that would be required to cause "default" problems. Hopefully if price falls further, that will change.

There is a difference between paper and physical. People tend to confuse holding physical as "insurance" and trading paper for profit. If someone wants to simply "flip" silver for a profit, the futures market is better since you get leverage and don't have to pay premiums like you do when you buy physical.

Just my opinion.

Jim

 

[Gatito Bandito]

No, I don't hedge..

One reason I stack/collect is to *get away* from trading & assets in the paper/digital form (like stocks, bonds, derivatives, bank balance, etc.).


Just as physical can have its negatives, it can also have its advantages that other assets don't..

And I don't want to intentionally introduce the paper/digital aspect to it, as that could potentially nullify some of those advantages.


I'm probably more collector than stacker, anyway.. So hedging stuff which can sport some higher premiums & collectable status seems a bit silly, in my case, anyhow.

But even then, if I were a hardcore low-premium stacker, I'm still not sure I'd be hedging. Though I recognize there can be profits to be made, if done properly, and why some would be inclined to attempt to do so in today's screwed-up markets.

 

[theFNG]

I can see how someone could really make some money with putting paper against phyz to almost never "lose."

Wrcmad seems to be successful using this method. However I would like to know from him and others doing this:

Must you be "trading" for the majority of the day, I mean, with respect, is this your job?

Are there books about how to get started?

If no books, how did you get started?

Are you doing other trading, like currency?

Thanks.

 

[Silverpv]

It's options trading. There's online classes and books on it. It's very lucrative. I just do it everynow and then. It can get pretty complex and also very expensive if you do it wrong. It goes both way, big winners = big losers on the other side.

The time period is what you want to buy. It can be 30 days to a year or anywhere inbetween.

 

[wrcmad]

It's options trading.

NO! ... it's not!
Besides the excessive premiums, the parcel size and added complexity of the option greeks... especially theta make it too complex, and difficult to manage correctly. There is not enough scope for me (personally) to accurately manage risk. The flexibility and value just isn't there.
CFD's all the way.

I can see how someone could really make some money with putting paper against phyz to almost never "lose."

Wrcmad seems to be successful using this method. However I would like to know from him and others doing this:

Must you be "trading" for the majority of the day, I mean, with respect, is this your job?

No. I use a methodology that suits my techniques, psych, and lifestyle. There is no way I want to be glued to a screen 24/7.
For a good description, see here: http://forums.silverstackers.com/message-314887.html#p314887
Actually, the whole thread pretty much sums it up in a nutshell: http://forums.silverstackers.com/topic-22773-i-don-t-wanna-stack-i-wanna-tradeplease-help.html
Then take a stroll through here: http://forums.silverstackers.com/topic-27970-silver-charting-and-silver-ta-chat.html

Are there books about how to get started?

Yes

If no books, how did you get started?

I had a good mentor, and paid my tutorial fees (novice losses). It takes time to develop a technique that suits you individually.

Are you doing other trading, like currency?

Thanks.

Yes.

 

[theFNG]

Thanks I will check out the other threads. If the learning curve looks too steep and expensive for me I might have to remain on the sidelines. I really appreciate the info guys!

 

[Caput Lupinum]

If you're looking at currency trading, you can always open a demo account and try various strategies first without risking real money

 

[Pirocco]

Wow thread this sounds like my Ex

Anyway staying on topic, I see silver as my hedge/savings. I don't really like the paper market it's whats wrong with PM's DUE TO MASSIVE MANIPULATION. comex is currently at 128.3 ounces of paper to every ounce of phyzz they hold, why people would buy into that baffles me.
Especially when we are looking a price variations of maybe a few bucks a year and a falling Aussie dollar
haven't people ever heard of Bitcoin? makes much more sense to have money parked in that than paper silver, and if like trading, even better! the same annual swings in silver can happen in a day in crypto's. which is also what turns some people off I guess.

What you name "paper market" is for silver at most (decades peak) 80000 contracts of 5000 ounces.
http://finviz.com/futures_charts.ashx?t=SI&p=m1

The green trendline below is this total net position. Red+blue gives the same but inverted figure.
That's a peak of 400 Moz, abit less than half decade's average of mine production + scrap recycling + government sales + net hedging supply.

Your 128.3 paper to physical is simply due to most futures contract participants just not wanting delivery of the silver, they want delivery of the dollars.
The futures contracts are just bogus orders. The goal is to be able to change the price and inflicting eventual sellers a lower, or buyers a higher price.
That's where the origin sits of those dollars that "compensate", that hedging delivers.
Instead, those that really want the metal order it on the cash market, they only take futures positions to lock in a cost / targeted profit, in case the price would change.
The price-related paper to physical is 400/900=45%. Alot less than that touted 1283%
The Comex could be seen as a kind of price agreement, abit like supermarkets can work together to inflict their customers a higher price. Or abit like how governments "harmonize" their tax rates, as to weaken competition and narrow down the choices speculators / evadors have.
Don't complain about it, just monitor this position, and the supply/demand figures, and the stocks, compare them to the past, and stack when it all looks like a bear market, everybody talks about lower until nobody is present anymore to talk (forums dead ), pm dealers and wrcmads return to cab driving, etc.

 

[wrcmad]

pm dealers and wrcmads return to cab driving, etc.

Awwwe.... you feeling a bit left out?